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Wednesday, May 10, 2006

Bolivia Gas Plan Causes South America Rift

SAO PAULO, Brazil - It wasn't long ago that South America's leftist leaders were sharing bear-hugs and talking about forming something like theEuropean Union with a pipeline network to solve energy problems, a unified parliament, and a currency good from Colombia's Caribbean beaches to Argentina's frosty southern coast.

Bolivian President Evo Morales changed all that: He abruptly took over his country's 53 foreign-owned natural gas installations and installed white-helmeted military police with semiautomatic rifles to guard the continent's second-largest gas reserves.

The nationalization evokes comparisons to decades past when Latin American regimes ruled with brute military force. It also has created a serious rift between the region's center-left governments and the hard-left administrations of Morales and his mentor, the socialist Venezuelan President Hugo Chavez.

"South America is back to its unstable ways, big time," said Gary Hufbauer, a senior fellow at the Institute for International Economics in Washington, D.C.

The takeover threatens to cause energy shortages and price hikes that could seriously damage the economies of Bolivia's biggest customers, Argentina and Brazil.

The Andean community and Mercosur economic blocs appear to be falling apart as Colombia and Peru clinch free trade deals with the United States, and Paraguay and Uruguay consider similar alliances. Bolivia and Venezuela lashed back by joining with communist Cuba in a trade pact promising a socialist version of regional cooperation.

Bolivia also alleged that its gas was being diverted from Argentina to Chile, playing on old border grudges and possibly reversing a warming trend in Bolivian-Chilean relations. Argentina and Uruguay are escalating their battle over potential pollution from pulp mills on their shared river."Call it regional disintegration," said David Fleischer, a political scientist at the University of Brasilia. "It all converged in the months of April and May, and we don't know how it's going to play out."

These presidents have downplayed trade disputes as the growing pains of a region still focused on unification. But when Morales surrounded Bolivia's gas fields and refineries with soldiers last week, a political fracture emerged that may be hard to repair.

Bolivia's gas takeover followed months of nervous anticipation and campaign promises by Morales to secure more gas profits he said were being "looted" by foreign companies.